In 2023, numerous budget cuts are set to go into effect. As the law currently stands, the Budget Control Act 2% sequestration will resume in the new year, and alongside it will come both an impending statutory 4% Pay-As-You-Go (PAYGO) cut and a budget neutrality reduction to the Medicare conversion factor.

Needless to say, this will have a dramatic impact on the entire industry. In this piece, we’re going to lay out exactly what these cuts entail, their potential consequences, and what needs to be done to prevent these consequences from seeing the light of day.

First, an introduction to the forthcoming cuts. The aforementioned 2% sequestration comes as a result of a budget enforcement mechanism established by the Budget Control Act of 2011, with annual sequestration cuts of 2% in effect since 2013.

As the pandemic swept through the country, Congress opted to put a temporary pause on these cuts — a pause that was extended until the end of 2021. As of April 1, 2022, however, the sequestration is coming back into effect, and without emergency action on the part of Congress, the annual cuts will resume until at least 2031.

Next, the statutory 4% Pay-As-You-Go (PAYGO) cut. The cost of the American Rescue Plan Act, which was passed in March of 2021, set off budget control requirements that will result in a significant cut to payments. Again, Congress has delayed these cuts through the end of 2022, though it is currently unclear if they will work to pass a further delay.

Finally, the budget neutrality reduction to the Medicare conversion factor. As we’ve previously covered, CMS recently decided to increase the value of specific service codes. Under budget neutrality requirements, this means that cuts must in turn be made to ensure balanced spending.

If all of these cuts come into effect at once, the impact on the healthcare industry will be serious. An overwhelming majority of practices already claim that the present Medicare reimbursement rates do not fully cover the cost of care, and other industry professionals report rising costs across the board. With these further cuts, there will have to be an incredible restructuring of healthcare practice in a very short amount of time — leading to issues for physicians and patients alike.

From this information, it should be clear that Congress’ current practice of passing short-term fixes is not an effective long-term solution to the country’s healthcare issues. Thankfully, there is currently some legislation being proposed that, if enacted, will offset some of the impacts of these cuts.

For example, Representatives Ami Bera, MD (D-CA) and Larry Bucshon, MD (R-IN) have recently joined together to introduce legislation that will provide an additional 4.42% to the Medicare Physician Fee Schedule (PFS) conversion factor.

Part of the legislation also stresses the need to find a long-term solution to these issues. In the bill, both Representatives push the need to “ensure financial stability and predictability in the Medicare physician payment system; promote and reward value-based care innovation; and safeguard timely access to high-quality care by advancing health equity and reducing disparities.”

While it does appear to be another stop-gap measure, if passed, the bill would provide medical professionals and lawmakers with more time to work out an effective payment reform strategy. This bill would go into effect on January 1st, 2023.

At the time of writing it is unclear whether this bill will pass, though it is increasingly apparent that Congress must act to prevent the many consequences of these cuts. Professionals in the field are currently putting considerable pressure on lawmakers to resolve the aforementioned issues; until they do, we will keep you up-to-date as the legislation moves through Congress.